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January 2018

Global Environmental Opportunities: invest in solutions to worldwide challenges

Harness growth opportunities whilst safeguarding the environment

Protecting the environment is now a priority for consumers, companies and governments. Their converging interests, driven by increased global awareness,technological advances and health concerns, are underpinning a global drive to safeguard the world’s natural resources.

1. Consumers' increasing awareness

Public opinion is forcing governments and private companies to make large-scale changes to their strategies.
North american organic products market
US organic food market size (USD bn)
North America organic market

Reference: Jefferies equity research

With nearly 50 per cent of the world connected to the internet1, the transmission of thought-provoking information has never been faster or more wide-reaching. 

Bearing testimony to this is the global social phenomenon that is “Under the Dome”, a film documenting the scale of China’s urban pollution, which was viewed online 200 million times within days of its release in 2015. Soon after, China pledged to cut its CO2 emissions to between 60–65 per cent of 2005 levels by 20302.

Companies are also responding to consumer demands, and are increasingly factoring in environmental considerations into their thinking. The rising supply of organic produce in agriculture is a prime example of a sector benefiting from a shift in consumer habits.

2. Private sector innovation

Private companies are seeking to benefit from the shift in consumer focus.
Environmental patents by region

Reference: World Intellectual Property Organization

For instance, the development of advanced analytics and services in the waste management and recycling sector is helping alleviate the wasteful use of natural resources.

Meanwhile, innovations such as better fluid dynamics modelling technology have greatly improved the quality and efficiency of water treatment and wastewater reuse technologies. In another example, companies can now analyse minute concentrations of pollutants, such as oestrogen from birth control tablets, in rivers. This can help them understand these chemicals’ effects on fish populations, and as a result bring about positive environmental change.

Between 2000 and 2012, global annual applications for environmental patents more than doubled (see chart). This is indicative of the increased focus private companies are placing on providing innovative solutions to environmental issues.

3. Government action

Environmental sustainability is also benefiting from governments' policy changes, such as the recent pledges by China to reduce CO2 emissions. This is in part being driven by new monitoring technologies, which are helping in the production of reports such as The World Health Organization's Air Quality Index (see below).
Global levels of urban ambient pollution*
Global levels of urban ambient pollution*

*Air quality is represented by annual mean concentration of particulate matter, smaller than 2.5 micrometers, per m3
Reference: World Health Organization, 2016

Recent reports have stated that over 7 million people died prematurely as a result of air pollution in 20123. Such statistics have contributed to the rise of multilateral environmental agreements, of which the cumulative total reached 1,100 by the end of 20124. Companies that recognise and support consumers' and governments' environmental shifts are likely to benefit and represent attractive long-term opportunities for investors.

Investing for a sustainable future

Environmental issues are now a matter of global importance. Companies that provide effective products and services that increase resource efficiency and minimise pollution are well placed to grow strongly. In our view, by investing in these firms, investors can make a positive contribution towards a more sustainable world, as well as generating attractive capital gains.